Speaker 1: Zone Media, stop your grinnin and drop your linen. I'm
Speaker 1: d zechron and this is better offline. Welcome to the
Speaker 1: final part of our three part Hater's Guide to the
Speaker 1: AI Bubble, where we've been talking about the growing cracks
Speaker 1: emerging in the industry and the potential contagion to the
Speaker 1: wider economy that are pullback in general of AI spending
Speaker 1: will cause. And I must be clear, things are bad
Speaker 1: the vibes A rand said. I spent the past two episodes,
Speaker 1: and we'll spend much of this episode explaining why. But
Speaker 1: I just want to recap something from the first part
Speaker 1: of this series. Right now, seven companies, the Magnificent Seven,
Speaker 1: account for the value of nearly thirty five percent of
Speaker 1: all of US stocks, and the biggest of these companies
Speaker 1: is in Nvidia, which has gotten fat off the back
Speaker 1: of the AI bubble today a disproportionate amount of Nvidia's
Speaker 1: revenue eighty eight percent of it is coming from the
Speaker 1: other members of the Magnificent Seven. And there of the
Speaker 1: enterprise GPUs designed to power the compute heavy eight A
Speaker 1: applications that you're hearing about all day. If and when
Speaker 1: they pull back, invidiabile sink so too will the other companies,
Speaker 1: especially when it becomes evident that they've spent nearly half
Speaker 1: a trillion dollars in two years on bugger roll. It'll
Speaker 1: be an apocalyptic shedding of value. They won't die, but
Speaker 1: it'll be the likes of which we haven't seen since
Speaker 1: the dark days of two thousand and seven and two
Speaker 1: thousand and eight for those companies. I don't know about
Speaker 1: the global banking system imploding, but I also can't say
Speaker 1: what I just I don't know. But what I do
Speaker 1: know is tech is going to take such a precipitous
Speaker 1: haircut that you're going to see scissor gashes in the
Speaker 1: man's bald head. Terrible metaphor. If that sounds like a
Speaker 1: them problem, though, and not a you problem, ask yourself,
Speaker 1: what's in your fuah one K? Do you own any
Speaker 1: index funds or ETFs? Are you close to retirement? And
Speaker 1: how much do you enjoy eating ramen? Are you willing
Speaker 1: to eat the same whiskers cat food as your American
Speaker 1: short hair? I am, except I feed them a different,
Speaker 1: better food because Babu deserves the best. But in the
Speaker 1: last two episodes, I made the case that the generative
Speaker 1: AI industry is unique in its capital demands and unparalleled
Speaker 1: in the fact that no company beside in video or
Speaker 1: consultancies are making any money from them. I can easily
Speaker 1: imagine the chain of events where one big company fails,
Speaker 1: like either because they ran out of money or because
Speaker 1: the investors pulled back. This in turn spooks the rest
Speaker 1: of the market, causing other companies to start seeing massive
Speaker 1: revenue drops. And as the demand for compute drops, hyper
Speaker 1: scalers like Microsoft, Amazon and Google massively cut their capital expenditures,
Speaker 1: canceling data center build outs and of course slowing down
Speaker 1: their GPU orders. And then Jensen Huang would have to
Speaker 1: watch as the cash cow that made his company rich
Speaker 1: and fat is take over a walk behind the barn
Speaker 1: for two shots to ring out. Though I must be clear,
Speaker 1: video isn't gonna die, None of the Magnificent seven will. However,
Speaker 1: the first big failure, the first domino to fall, could
Speaker 1: be any number of companies, and while I don't think
Speaker 1: open Ai and Anthropic are necessarily going to be the first,
Speaker 1: I also believe that there's an air of inevitability about
Speaker 1: one of or both of their demises. This matter is
Speaker 1: because these companies are for all intents and purposes the
Speaker 1: generative AI industry. They're deeply unsustainable and unstable, and yet
Speaker 1: they are also critical to the AI trade. Continuing, I
Speaker 1: haven't really spent much time on my favorite subject, that
Speaker 1: open ai is a systemic risk to the tech industry.
Speaker 1: But let's recap my reporting. Open Ai and Anthropic both
Speaker 1: lose billions of dollars a year after revenue, and their
Speaker 1: stories do not mirror any other startup in history, not Uber,
Speaker 1: not Amazon Web Services, and nothing. I've addressed my Uber
Speaker 1: point before in how does open ai survive? It'll be
Speaker 1: in this show notes. Someone always asks me about this.
Speaker 1: Please stop, learn to read, learn to listen. Soft Bank
Speaker 1: also is putting itself in dire straits simply to fund
Speaker 1: open Ai. The steel threatens its credit ring, with SoftBank
Speaker 1: having to take on what will be multiple loans to
Speaker 1: fund the remaining thirty billion dollars open ai is forty
Speaker 1: billion dollar funding round which is yet to close, and
Speaker 1: open aiy is in fact still raising from the Middle East.
Speaker 1: This is before you consider the other nineteen billion dollars
Speaker 1: that soft Bank has agreed to contribute to the Stargate
Speaker 1: Data Center project, money that it does not have available
Speaker 1: at this time. But I must say, while recording this episode,
Speaker 1: I saw some news come out and I'm just going
Speaker 1: to read it to you and said soft Bank and
Speaker 1: open Ai is five hundred billion AI project struggles to
Speaker 1: get off ground. The Stargate venture introduced a white house event,
Speaker 1: is now setting the more modest goal of building a
Speaker 1: small data center by year. And I just want to say,
Speaker 1: anyone that doubted me can suck one. I was oinking
Speaker 1: and squawking around my room just before this when I
Speaker 1: got this news in. I just want to say, I
Speaker 1: just learned this news and I'm still taking it in.
Speaker 1: I'm still taking in because it makes me so excited
Speaker 1: and sad. Anyway, neither soft Bank nor open Ai has
Speaker 1: the money for Stargate, regardless of what they built. Also,
Speaker 1: Clammy Samy's making some interesting claims about what Stargate is.
Speaker 1: He's claimed the Denton site, the core Weavers building is
Speaker 1: also Stargate. This motherfucker loves lying anyway. Open A must
Speaker 1: also convert to a for profit by the end of
Speaker 1: twenty twenty five, all whose twenty billion dollars of the
Speaker 1: remaining thirty billion dollars of funding. If it does not
Speaker 1: convert by October twenty twenty six, it's current funding converts
Speaker 1: to debt. It is also demanding remarkable and reasonable concessions
Speaker 1: and Microsoft stuff like they want to reduce their rev share,
Speaker 1: They want to reduce their their I think, their ability
Speaker 1: to their exclusive rights to sell models. I did I
Speaker 1: really need to do a monologue about this, and I
Speaker 1: know this is technically a monologue, but nevertheless, they want
Speaker 1: these insane things, and Microsoft is refusing to budge, and
Speaker 1: it's willing to walk away from negotiations necessary to convert.
Speaker 1: According to the Financial Times, and also open Ai does
Speaker 1: not have a path of profitability, and its future, like Anthropics,
Speaker 1: is dependent on the continual flow of capital from venture
Speaker 1: capitalists and big tech, who must also continue to expand infrastructure.
Speaker 1: I don't know how that's going to fucking happen with
Speaker 1: Stargate going. God, I feel so good about that. Oh
Speaker 1: I want to like bottle that up and drink it. Anyway.
Speaker 1: Anthropic is in a similar but slightly better position. It's
Speaker 1: set to lose three billion dollars this year on four
Speaker 1: billion dollars of revenue. It also has no path of
Speaker 1: profitability and recently jacked up prices on cursor, it's larger
Speaker 1: customer has had to put restraints on clawed code after
Speaker 1: allowing users to burn one hundred to ten thousand percent
Speaker 1: of their revenue a month. These are the actions of
Speaker 1: a desperate company. Nevertheless, Open Ai and Anthropics revenue amount to,
Speaker 1: by my estimates, more than half of the entire revenue
Speaker 1: of the generative AI industry, including the hyperscalers. And to
Speaker 1: be abundantly clear, the two companies that amount to a
Speaker 1: round half of all generative AI revenue are only losing money. Now.
Speaker 1: I said a lot of this before, which is why
Speaker 1: I'm trying not to harp on it too much. But
Speaker 1: the most important company in the entire AI industry needs
Speaker 1: to convert to a for profit entity from a nonprofit entity,
Speaker 1: which has never happened before in this case, by the
Speaker 1: end of the year or it's effectively dead. And even
Speaker 1: if it does, Open AI burns billions and billions and
Speaker 1: billions of dollars a year and will die without continual funding.
Speaker 1: They have no path to profitability in anyone telling you
Speaker 1: otherwise as a liar or a fantasist. And on top
Speaker 1: of this is part of the thing about SoftBank, by
Speaker 1: the Way and Stargate. They revealed that they've promised Oracle
Speaker 1: thirty billion dollars a year their cloud contract. I swear
Speaker 1: to fucking God does no one read these stories and
Speaker 1: think does this not sound just like an egregious lie? Anyway,
Speaker 1: as I wrote earlier in the year, there is really
Speaker 1: no significant adoption of generative AI services or products. Chat
Speaker 1: GPTs five hundred million weekly users, and otherwise it seems
Speaker 1: that other services they struggled to get fifteen million users.
Speaker 1: Although you could mention Google that's not a fair comparisons.
Speaker 1: It cheated by combining Google Gemini with Google Assystem to
Speaker 1: claim it had three hundred and fifty million active users
Speaker 1: a while the five hundred million weekly users sounds and
Speaker 1: is in fairness impressive. There's a world of difference between
Speaker 1: someone using your product as part of their job, which
Speaker 1: they pay for, and someone dicking around with an image
Speaker 1: generator or a college student trying to cheat on their homework.
Speaker 1: On top of that, now I'm recording this July twenty first,
Speaker 1: there's an ICO story that came out today with some
Speaker 1: bullshit vanity metrics, rope and AI. But that story said
Speaker 1: the Open AI themselves had said that they have five
Speaker 1: hundred million weekly active users. Now here's the crazy thing.
Speaker 1: That five hundred million number. That from March. That's and
Speaker 1: March now, but I came from an open AI funding announcement.
Speaker 1: Have they platowed stick around? I'm going to find out.
Speaker 1: But this is all worrying on so many levels, chief
Speaker 1: of which is that everybody has been talking about AI
Speaker 1: for three goddamn years, and everybody has said AI and
Speaker 1: every earnings and media appearance, exhausting fucking blog posts, and
Speaker 1: we still can't scrape together the bits to make functional industry.
Speaker 2: Now.
Speaker 1: I know some of you will probably read this in
Speaker 1: point to chat gipt's users, and I quote myself writing
Speaker 1: in my newsletter make fun of them, which also read
Speaker 1: for this podcast. Chat gpt is allegedly five hundred million
Speaker 1: weekly hatieth users and by the last count, only fifteen
Speaker 1: point five million paying subscribers, an absolutely futrid conversion rate,
Speaker 1: even before you realize that the actual conversion rate would
Speaker 1: be monthly active subscribers, which is how any real software
Speaker 1: company actually defines its metrics. By the fucking way, Why
Speaker 1: is this impressive? Because it grew so fast it literally
Speaker 1: had more pr and more marketing and more attention and
Speaker 1: more opportunities to sell to more people than any company
Speaker 1: has ever had in the history of anything. Every single
Speaker 1: industry has been told to think about AI for three years,
Speaker 1: and they've been told to do so because of a
Speaker 1: company called open Ai. There isn't a single goddamn product
Speaker 1: since Google or Facebook bes's had this level of media pressure,
Speaker 1: and both of these companies launched without the massive amount
Speaker 1: of media and social media that we have today. CHADGBT
Speaker 1: is a very successful growth product and an absolutely horrifying business.
Speaker 1: They're a banana republic that cannot function on their own.
Speaker 1: They do not resemble Uber, Amazon, Web Services or any
Speaker 1: other business in the past other than we work the
Speaker 1: other company that SoftBank spent way too much money on,
Speaker 1: and outside of chad GBT, there really isn't anything else.
Speaker 1: But before I wrap up this three parter and I'm tired,
Speaker 1: and I imagine you are too, I do want to
Speaker 1: address something. I want to address the kind of both
Speaker 1: sides thing that everyone's doing, and I think we all
Speaker 1: need to do way less of this because at this
Speaker 1: point it's kind of silly. Yes, Generati, if AI has functionality,
Speaker 1: there are coding products and search products that people like
Speaker 1: and some even pay for them. As I have discussed
Speaker 1: across this series and I said discuss there, but I'm
Speaker 1: keeping going and across countless podcasts and newslayers. None of
Speaker 1: these companies are profitable until one of them is profitable,
Speaker 1: really profitable sustainably, so generative AI based companies are not
Speaker 1: real businesses in any case. The problem isn't so much
Speaker 1: that l elms don't do anything, but that people talk
Speaker 1: about them doing things they can't. The use of the
Speaker 1: word agent is a deliberate attempt to suggest that l
Speaker 1: elms are autonomous, and any and all stories about AI
Speaker 1: replacing jobs are intentionally manipulative attempts to boost stock valuations
Speaker 1: and suggests that models are capable of replacing human workers
Speaker 1: at scale, which they are not. Allison Morrow of CNN,
Speaker 1: who's been on the show a few times, also has
Speaker 1: an excellent piece on this, which I've linked to in
Speaker 1: the show notes. As I discussed in my newsletter Sincerity
Speaker 1: Wins the War, which I've also linked to, this is
Speaker 1: one of the most egregious failures of the tech media
Speaker 1: I've ever seen, willingly pushing warrio Amma days outright making
Speaker 1: up of stuff. No one asked him if that if
Speaker 1: the stat he said ten to twenty percent white collar unemployment,
Speaker 1: if I started lying, I just really want to be
Speaker 1: clear about something. If I went on this podcast and
Speaker 1: I just fucking made up stats, if I was just like, yes,
Speaker 1: seventy five percent of all generative ais CEOs, literally they
Speaker 1: love kicking puppies, they love drop kicking puppies, you'd get
Speaker 1: mad at me. Right. What's the difference between that and
Speaker 1: Wario Ama Day saying twenty percent white collar and unemployment.
Speaker 1: There is none. They're both lies. And I don't know
Speaker 1: why I'm doing the dog kicking one, but it's just
Speaker 1: an example. We move on. And as a side note,
Speaker 1: the discussion also of the term AGI artificial general intelligence,
Speaker 1: and every acceptance of it is an attempt to suggest
Speaker 1: that large language models can create conscious intelligence, a fictional
Speaker 1: concept that even Meta's chief AI scientist says won't come
Speaker 1: from scaling up llms. Members of the media, listen to me,
Speaker 1: every time you talk about the really smart engineers that
Speaker 1: say Meta is paying one hundred million dollars two know
Speaker 1: that you are doing free marketing for these companies when
Speaker 1: what's really happening is people are giving tens of millions
Speaker 1: of dollars, the guys who will work on teams that
Speaker 1: are pursuing a totally unproven concept. It is like saying
Speaker 1: that they are all going to see if they could.
Speaker 1: I don't know. I was about to say the wrong
Speaker 1: create the wrong trend from Rollss and Grummet, Rollis and
Speaker 1: Wallace and Grummet. But you know those are one hundred
Speaker 1: percent possible. I'm sure someone could build them. How about this,
Speaker 1: They all believe they're going to hunt and kill the
Speaker 1: tooth Fairy because the tooth Fairy is about as realistic
Speaker 1: as agi, and if you disagree with me, emummy, I
Speaker 1: might even read him. I should also add that the
Speaker 1: use of the word singularity is similarly manipulative. These are
Speaker 1: terms that are used to obfuscate the actual abilities of
Speaker 1: large language models and indeed what can be built on them.
Speaker 1: It's really frustrating because these should be really obvious tricks,
Speaker 1: but the media keeps accepting them. And I don't want
Speaker 1: to accuse anyone of being anything. I just want to
Speaker 1: say I find it fucking disgusting. And when this all
Speaker 1: falls apart, there will be a referendum on this. I
Speaker 1: will not be kind or merciful to the people that
Speaker 1: have continually pushed these narratives. I also want to add
Speaker 1: there's another really annoying narrative that we need to get
Speaker 1: rid of, and that's these stories models lying, cheating, and
Speaker 1: stealing to reach their goals or stop themselves being turned off.
Speaker 1: These are intentionally deceptive, as these models can and clearly
Speaker 1: are being prompted to take these actions. To be abundantly clear,
Speaker 1: the manipulative suggestion here is that these models are autonomous
Speaker 1: or conscious in some way, which they're not. When I
Speaker 1: say prompted, I mean we don't have all of the
Speaker 1: information as to how these models were trained or prompted
Speaker 1: to get these answers. They can make them do them.
Speaker 1: They could create a model to do it. And oh anthropic,
Speaker 1: wouldn't lie, wouldn't they, Dario Amat They went on stage
Speaker 1: and said they'll be twenty percent unemployment from white collar labors,
Speaker 1: and he'll claim me he said it was the future.
Speaker 1: It's a fucking lie, absolutely ridiculous. And I believe that
Speaker 1: the generative AI market is a fifty billion dollar revenue industry,
Speaker 1: masquerading is a trillion dollar one, and the media is helping.
Speaker 1: And underneath this troubling fact there's another one that should
Speaker 1: give us pause. The AI trade really is not about AI.
Speaker 1: It's not about generative AI, it's not about autonomous agents,
Speaker 1: it's not about AGI. It's all about GPUs, and it's
Speaker 1: incredibly brittle as a result. Now, as I've explained at length,
Speaker 1: the AI trade is not one based on revenue user growth,
Speaker 1: the effixive tools or significance of any technological breakthrough. Stocks
Speaker 1: are not moving based on whether they're making money or AI,
Speaker 1: because if they were, they'd be moving downward. However, due
Speaker 1: to the ViBe's based nature of the AI trade, companies
Speaker 1: are benefiting from the press inexplicably crediting growth to AI
Speaker 1: with no proof that that's the case. Open AI is
Speaker 1: a terrible business, But the only business worse than open
Speaker 1: AI are the companies built on top of them. Large
Speaker 1: language models are too expensive to run and have limited
Speaker 1: abilities beyond the ones I'm named previously, and because everybody's
Speaker 1: running models that all on some level do similar things,
Speaker 1: it's very hard for people to build really innovative products
Speaker 1: on top of them. But ultimately, this entire trade, all
Speaker 1: of the AI trade, hinges on GPUs. Coreweave was initially
Speaker 1: funded by Nvidia. They're a company that does AI data centers.
Speaker 1: I don't want to talk about them, makes me angry,
Speaker 1: but their IPO was funded partially buy and Video sells
Speaker 1: the GPUs. Video is also one of their customers, and
Speaker 1: core Weave raises debt to buy GPUs by using the
Speaker 1: GPUs they've already bought as collateral, and so they get
Speaker 1: those loans, and then they use that money to build
Speaker 1: data centers and buy more GPUs to put in them,
Speaker 1: which they then use as leverage to Do you see
Speaker 1: the Do you see the problem? Do you see the
Speaker 1: issue with that? This isn't me being polemic or hysterical,
Speaker 1: by the way, this is quite literally what's happening and
Speaker 1: how core Weave operates. If you want alarm by that,
Speaker 1: I'm not sure what to tell you Elsewhere. Oracle is
Speaker 1: buying forty billion dollars in GPUs for the still uninformed
Speaker 1: Stargate Data Center project, and Meta is building a Manhattan
Speaker 1: sized data center to fill within video GPUs. If you
Speaker 1: believe that Meta will actually do that, which I do not.
Speaker 1: Open AI is also Microsoft's largest as your client and
Speaker 1: insanely risky proposition on multiple levels, not simply in the
Speaker 1: fact that it's serving the revenue at cost, but the
Speaker 1: Microsoft executives believed that open ai would fail in the
Speaker 1: long term when they invested in twenty twenty three. According
Speaker 1: to the information, Microsoft is in Videa's largest client for GPUs,
Speaker 1: meaning that any changes to Microsoft's future and interest in
Speaker 1: open AI, such as reducing its data center expansion, would
Speaker 1: eventually hit in Vidia's revenue. Why do you think deep
Speaker 1: seek shocked the market. It wasn't because of any clunky
Speaker 1: story around training techniques or costs. It was because it's
Speaker 1: said to the market that and Video might not sell
Speaker 1: more GPUs every single quarter in perpetuity. Microsoft, Meta, Google, Apple, Amazon,
Speaker 1: and Tesla aren't making much money from AI. In fact,
Speaker 1: they're losing billions of dollars on whatever revenues they do
Speaker 1: make from it. Their stock growth is not coming from
Speaker 1: actual revenue or actual products, but the vibes around being
Speaker 1: an AI company, which means absolute jack shit when you
Speaker 1: don't have to users, finances, or products to back them up.
Speaker 1: So really everything on the AI trade comes down to
Speaker 1: in Video's ability to sell GPUs and more of them
Speaker 1: each quarter. And this industry, if we're really honest, is
Speaker 1: at a point where it really only exists to do
Speaker 1: so genera. If AI products do not provide significant revenue growth,
Speaker 1: its products are not useful in the way that unlock
Speaker 1: significant business value, and the products that have some adoption
Speaker 1: run at such a grotesque loss. It's really sad. But
Speaker 1: I realize I've thrown a lot at you. And for
Speaker 1: the second time this year, I've recorded the three part
Speaker 1: podcast series. And what's great is you may think maybe
Speaker 1: I took a break. Maybe no. I recorded these bad
Speaker 1: boys back to back to back. That's why I sound
Speaker 1: so tired and why my voice kind of I think
Speaker 1: smooths out. I like doing this, but I needed to
Speaker 1: say all of this. I really did because I am
Speaker 1: genuinely really worried. We're in a bubble. If you do
Speaker 1: not think we're in a bubble, you are not looking outside.
Speaker 1: Apollo Global chief economist Torsten slock Killer name said it
Speaker 1: last week in a research note published July sixteenth. Okay,
Speaker 1: what he said was much worse. The difference between the
Speaker 1: IT bubble in the nineteen nineties and the AI bubble
Speaker 1: today is that the top ten companies in the S
Speaker 1: and p today are more overvalued than they were in
Speaker 1: the nineteen nineties. Slock wrote in a recent research note
Speaker 1: that was widely shared across social media. In financial circles,
Speaker 1: we're in a bubble. We're in a bubble general. If
Speaker 1: AI does not do the things that it's being sold
Speaker 1: as doing, and the things it can do aren't the
Speaker 1: kind of things that create business returns, automate labor are
Speaker 1: really do much more than one extension of a cloud
Speaker 1: service platform. The money isn't there, the users aren't there.
Speaker 1: Every company seems to lose money, and some companies lose
Speaker 1: so much money it's impossible to tell how they'll survive.
Speaker 1: Worse Still, this bubble is entirely symbolic the bailouts. And
Speaker 1: I know I get a lot of emails about this,
Speaker 1: and I'm really going to address this issue right now.
Speaker 1: The bailouts of the Great Financial Crisis were focused on
Speaker 1: banks and funds that have failed because they ran out
Speaker 1: of money, and the top initiative existed to plug holes
Speaker 1: with low interest loans. There are no few holes to
Speaker 1: plug here, because even if OpenAI and anthropics somehow became
Speaker 1: eternal money burners, the AI trade exists based on the
Speaker 1: continued and continually increasing sale and use of GPUs. There
Speaker 1: are limited amounts of capital, but also limited amounts of
Speaker 1: data is to actually put GPUs, and on top of that,
Speaker 1: at some point growth will slow at one of the
Speaker 1: magnificent seven, at which cost time costs will have to
Speaker 1: come down from things that lose them tons of money,
Speaker 1: such as generative AI. I really want to be clear,
Speaker 1: though a lot of people say, oh, it's really kind
Speaker 1: of lazy doomerism. I don't appreciate it, because, like, if
Speaker 1: you're going to be worried about something, be worried about
Speaker 1: something that's real, you're saying, oh, Trump will just bail
Speaker 1: them out. Oh, they'll get bailed out. Who will get
Speaker 1: bailed out? For this fast to continue? In video? Is
Speaker 1: thirty nine point one billion dollars of data cent revenue
Speaker 1: in the last quarter. That means the next one needs
Speaker 1: to be forty four and one after that needs to
Speaker 1: be like fifty sixty eighty one hundred. This needs to
Speaker 1: continue forever. Is the government going to nationalize in video?
Speaker 2: Is?
Speaker 1: Well? I guess that would take them off the market,
Speaker 1: wouldn't it is they're just going to feed in video
Speaker 1: fifty sixty seventy billion dollars. I guess if one of
Speaker 1: these AI companies fail, they could give them money, but
Speaker 1: they're just going to go ahead and fucking lose it.
Speaker 1: What do you think they're going to do? Where does
Speaker 1: the money go? In the Great Financial Crisis, banks failed,
Speaker 1: you had to give the bank's money. Hedge funds failed,
Speaker 1: you had to give money to places, and then they
Speaker 1: took the money and they weren't out of money anymore.
Speaker 1: This isn't a case where companies will run out of
Speaker 1: money but otherwise be okay. They don't have a way
Speaker 1: of being okay. There is no way of being okay.
Speaker 1: If you want to be a duma. Look at the
Speaker 1: fact that the fucking stock market is built on saling
Speaker 1: more and more GPUs every quarter. There is no plugging
Speaker 1: that hole. There's nothing for you to do. Oh god,
Speaker 1: this guy, what isn't the cost of inference coming down? No,
Speaker 1: you do not have proof of this statement. The cost
Speaker 1: of tokens is going down, and that is not the
Speaker 1: cost of inference going down. Everyone's saying this is they're
Speaker 1: saying it because a guy once said it to them.
Speaker 1: You do not have proof. I have more proof for
Speaker 1: what I am saying, well, it theoretically might be going down.
Speaker 1: All evidence points to the larger models costing more money, especially
Speaker 1: reasoning having ones like Claude Opu's four. Inference is not
Speaker 1: the only thing happening. If this is your one response
Speaker 1: for a big bozo and a dufus and should go
Speaker 1: back to making squeaky noises when you see tech executives
Speaker 1: or hear my name and a podcast. It's sickening. Even
Speaker 1: if the cost of inference is going down, on what
Speaker 1: model exactly is it coming down on? I don't know three,
Speaker 1: opus fource on it. Four. I don't think it is.
Speaker 1: The price that the model developers are charging. By the way,
Speaker 1: is not the price of inference. That's not the same thing.
Speaker 1: It's not the same thing at all. I'm really sick
Speaker 1: of this goddamn point. You can hear it in my voice.
Speaker 1: But let's move on. So some people bring up a
Speaker 1: six and they are these customized chips for specific options
Speaker 1: to reduce the amount that these companies are spending on compute. Right.
Speaker 1: I have a few thoughts when is this going to happen?
Speaker 1: For example, say open aim Broadcom actually build their asick
Speaker 1: in twenty sixteen, twenty twenty six. They won't do this,
Speaker 1: but that's when they're meant to How many will they build?
Speaker 1: Do they have contact contracts with companies that can actually
Speaker 1: produce high performance silicon or there's only three of those, Samsung,
Speaker 1: TSMC and SMICE which is currently sanctioned. And these companies
Speaker 1: typically have their capacity booked well in advance. Great example
Speaker 1: for you in Nvidia restarts that h twenty GPUs and
Speaker 1: told customers is reported by the information that they're not
Speaker 1: going to make more because the capacity they had at
Speaker 1: TSMC got given away because they canceled it. Even starting
Speaker 1: a production run of a semiconductor product can take weeks.
Speaker 1: Do they have the server architecture prepared? Have they tested it?
Speaker 1: Does it work? Is the performance actually good? Because the
Speaker 1: information reported the Microsoft has failed to create a workable,
Speaker 1: reliable ASIC and the one that they're going to bring
Speaker 1: out next year is going to be still worse than
Speaker 1: in videos. What makes open ay special? What gives them
Speaker 1: the industry knowledge that means that they won't run into
Speaker 1: these problems? The answer is nothing, absolutely bloody nothing. Anyway,
Speaker 1: if this happens, and should be clear, it takes a
Speaker 1: lot of money to build these chips, and they're yet
Speaker 1: to prove that these chips be better than Nvideo GPUs
Speaker 1: FORRAI compume they're going to have to retrofit every data
Speaker 1: center for them. By the way, they're not just going
Speaker 1: to plug into the same thing, these Blackwell chips, and
Speaker 1: actually generally GPUs they have specialized server architecture and N
Speaker 1: Video is a big stickler for DETAI. So we're just
Speaker 1: going to rip up all the stuff. So this will
Speaker 1: I assume take two minutes, because it needs to. It's
Speaker 1: the only way. By the way, if this actually happens,
Speaker 1: it still fucks up the AI trade because then video
Speaker 1: still needs to sell GPUs. Jesus Christ, I'm sorry. I'm sorry,
Speaker 1: And people ask, is this real? Anger? Yeah. I I
Speaker 1: read about these things, and I read the inconsistencies in
Speaker 1: the media, and I talk about them, and I think
Speaker 1: of the amount of times in my life I have
Speaker 1: had people make me feel stupid or make me feel crazy.
Speaker 1: I'm sure many of you have had this experience too,
Speaker 1: people that are allegedly smart, people that have positions of power,
Speaker 1: people that we look to as responsible figures. And I
Speaker 1: think about all the times that I've known I was right,
Speaker 1: but because there was a consensus, a group ideal, you
Speaker 1: had to kind of stick by it even if it
Speaker 1: was something factually wrong. What I did the experience in
Speaker 1: the past was seeing the media do it like this,
Speaker 1: and the way in which the media has done it,
Speaker 1: it's sickening. It's sickening because the people that will get
Speaker 1: hurt will be the people whose retirements and who's just
Speaker 1: savings are going to get lamped by this crap. And
Speaker 1: I'm worried. I'm worried because despite all these obvious, brutal
Speaker 1: and near on fixable problems, everybody is walking around acting
Speaker 1: like things are going great with AI. The New York
Speaker 1: Times claims everybody is using AI for everything, and I'm talking,
Speaker 1: of course about Kevin Ruse and Casey Newton. But baby
Speaker 1: cannot wait for when this explodes. Guys, you have no
Speaker 1: idea how funny it's going to be. And by the way,
Speaker 1: this is a blatant lie, one that exists to prop
Speaker 1: up an industry that has categorically failed to deliver the
Speaker 1: innovations of returns that it promised, yet still receives this
Speaker 1: glowing press from a tech and business media that refuses
Speaker 1: to look outside and see that the sky is red
Speaker 1: and frogs are landing everywhere other than the frog thing.
Speaker 1: I'm not being dramatic. Everywhere you look in the AI trade,
Speaker 1: things are getting worse. No revenue, William's being burned, no mote,
Speaker 1: no infrastructure play, no comparables in history other than the
Speaker 1: dot com bubble and we work, and a series of
Speaker 1: flagrant lies spouted by the powerful and members of the
Speaker 1: press that are afraid of moving against market consensus. Worse still,
Speaker 1: despite Nvidia's strength, in Vidia is the market's weakness through
Speaker 1: no fault of its own. Really, Jensen Wong sells GPUs,
Speaker 1: people want to buy GPUs, and now the rest of
Speaker 1: the market is leading aggressively on one company selling one thing,
Speaker 1: feeding it billions of dollars in the hopes that the
Speaker 1: things they're buying start making them profit. And that really
Speaker 1: is the most ridiculous thing. At the center of the
Speaker 1: AI trade sits enterprise GPUs that on installation immediately start
Speaker 1: losing the company and question money. Large language models burn
Speaker 1: cash for negative returns to build products that all kind
Speaker 1: of work the same way. Now, if you're gonna say
Speaker 1: I'm wrong, sit and think carefully about why is it
Speaker 1: because you don't want me to be right? Is it
Speaker 1: because you think these companies will work it out? This
Speaker 1: isn't anything like uber aws or any other situation. It's
Speaker 1: its own monstrosity, a creature of hubrious and ignorance caused
Speaker 1: by a tech industry that's out of ideas, built on
Speaker 1: top of a one company. Really, play with me all
Speaker 1: you want about how there are actual people using AI.
Speaker 1: You've probably read the my AIS skeptic friends are All
Speaker 1: Nuts blog, and if you're going to send that to me,
Speaker 1: read the response from Nick Suesh First. I've linked both
Speaker 1: in the show notes. And if you're going to say
Speaker 1: that I don't actually speak to people who use these products,
Speaker 1: you are categorically wrong and in denial. I'm only saying
Speaker 1: all of this with this aggressive tone because for the
Speaker 1: best part of two years, I've been made to repeatedly
Speaker 1: explain myself in a way that no AI optimist has
Speaker 1: ever been made, and I admit I resent it. I
Speaker 1: have read hundreds of thousands of words, with hundreds of citations,
Speaker 1: and still to this day, there are some people that
Speaker 1: claim I'm somehow flawed in my analysis, that I'm missing something,
Speaker 1: that I am somehow failing to make my case that
Speaker 1: I haven't spoken to enough fart sniffers, that I haven't
Speaker 1: delighted in the ideals and falsities of AGI. The only
Speaker 1: people failing to make their case the AI optimists, still
Speaker 1: claiming that these companies are making powerful AI, and once
Speaker 1: this bubble pops, I will be asking for an apology.
Speaker 1: But I must be clear, even though a lot of
Speaker 1: things are coming true that I thought would, and I
Speaker 1: think more will come true, I'll be proven right again
Speaker 1: and again. I don't actually like what's happening. And I
Speaker 1: like ending these podcasts with personal thoughts about stuff because
Speaker 1: I'm an emotional and overly honest person. I enjoy doing
Speaker 1: this a great deal. I do not, however, enjoy telling
Speaker 1: you at length how brittle everything is. An ideal tech
Speaker 1: industry would be one built on innovation, revenue, real growth,
Speaker 1: based on actual business returns that helped humans be better,
Speaker 1: and not outright lies about replacing them. All that Generative
Speaker 1: AI has done has shown how much loss there is
Speaker 1: in both the markets and the media and replacing labor,
Speaker 1: and I must be clear, it really is the media.
Speaker 1: There are some of you who are fucking circos and
Speaker 1: not pointing to anyone specifically. But if you are excited
Speaker 1: about AI replacing people, I need you to review your
Speaker 1: biases a little bit. I need you to think about
Speaker 1: what it is you're so excited about another aside. By
Speaker 1: the way, all these agi artificial general intelligence conversations, they
Speaker 1: love to talk about why they're scared of them, but
Speaker 1: they never want to talk about one thing, which is,
Speaker 1: if we make a conscious intelligence, wouldn't that have personage
Speaker 1: and we control and manipulate this conscious being, that's slavery.
Speaker 1: We would have been inventing a new kind of slave,
Speaker 1: because if we are making computers that have consciousness, that's
Speaker 1: what we are doing. If you don't believe this, by
Speaker 1: the way, you just don't want to think about the truth.
Speaker 1: But on the jobless thing, I really do believe that
Speaker 1: there are multiple reporters if your genuine excitement when they
Speaker 1: write scary stories about how Daria Amadasa's white collar workers
Speaker 1: will be fired in the next few years in favor
Speaker 1: of age. It's gross and I know I'm repeating myself,
Speaker 1: but I really must be clear, be more mindful about
Speaker 1: what you're writing, because what you're writing does not prove
Speaker 1: this thesis at all. You're just repeating a guy's thingy,
Speaker 1: you're repeating what a guy said, and it's sickening. But
Speaker 1: before I move into the end of this, I also
Speaker 1: want to address one other thing that and I'm doing this,
Speaker 1: I'm fully going to admit because someone just sent me
Speaker 1: an email about this and they just sent me this
Speaker 1: gotcha thing where it's okay, the government just gave Department
Speaker 1: of Defense gave two hundred million dollar contracts to open
Speaker 1: Ai Xai Google anthropic. I believe and that somehow government
Speaker 1: money will plug this. Well, first of all, all the
Speaker 1: revenue is unprofitable. Second of all, no, it won't like it.
Speaker 1: It isn't enough money they need for open Ai to
Speaker 1: somehow become profitable. They need to need like ten billion
Speaker 1: dollars of free money every year, like just given to
Speaker 1: them with no expenditure. On top of this, there is
Speaker 1: this weird duma of philosophy. It's like, oh, the government
Speaker 1: will use it for propaganda. They will use it as
Speaker 1: a cheap propaganda machine. Bec and really does propaganda. We've
Speaker 1: done propaganda for years, every government does. There's nothing efficient
Speaker 1: or cheap or even useful about it. They're already the
Speaker 1: White House is already posting AI generated stuff. Is how
Speaker 1: is this going to keep the industry going exactly? Who
Speaker 1: fucking knows. But then there's this thing of oh, the
Speaker 1: surveillance state, the generative AI. This will prop up open AI,
Speaker 1: anthropic and the likes. It will plug into all the
Speaker 1: data sets and go, oh, we can do shit. Even
Speaker 1: if it does that, I don't even want to think
Speaker 1: of them doing this. It's not a fucking business. It's
Speaker 1: not going to make them that much money. There's nothing
Speaker 1: specialist about it because all large anguish models are fundamentally
Speaker 1: trained on the same data, not only really tweaked by
Speaker 1: reinforcement learning and the like. It's just they'll just buy
Speaker 1: whatever model is cheapest, or they'll put it on prem
Speaker 1: It doesn't really And I do want to say, if
Speaker 1: you're scared of this stuff, be scared of the real stuff.
Speaker 1: Don't just assume the worst and then don't think about
Speaker 1: it much more. If you're going to assume the worst,
Speaker 1: assume based on facts. I want you to feel better
Speaker 1: when you listen to this, or at least edified. And
Speaker 1: I don't want to ever scare you. I don't really
Speaker 1: want to tell you how to feel. Ever, it's one
Speaker 1: of the early feedbacks on the shows. Never tell people
Speaker 1: how to feel, but I want you to contact me
Speaker 1: if you're ever worried. I'm happy to help. But also
Speaker 1: know that these are not smart men, and things have
Speaker 1: got out of hand, and everything I'm discussing is the
Speaker 1: result of the rot economy thesis. I wrote in twenty
Speaker 1: twenty three, The underlying thesis of this entire show, this
Speaker 1: growth of all cost mindset that's driven every tech company
Speaker 1: to focus on increasingly large quarterly revenue numbers even if
Speaker 1: the products are or they're deeply unprofitable, or in the
Speaker 1: case of generative AI both. Nowhere has this ever been
Speaker 1: more obvious, Never has there been a more pungent version
Speaker 1: of the rot economy than in large language models or
Speaker 1: more specifically, transformer based models. In their relationships with GPUs,
Speaker 1: by making everything about growth, you inevitably reach a point
Speaker 1: where the only thing you know how to do is
Speaker 1: spend money. And both l LAMBS and GPUs allow big
Speaker 1: tech to do the thing that work before building a
Speaker 1: bunch of days centers and buying a large bunch of
Speaker 1: chips and paying a lot of people without making sure
Speaker 1: they've done the critical work of making sure this would
Speaker 1: create things that were useful or profitable, and neither seems
Speaker 1: to be the case. As a result, we're now sitting
Speaker 1: on top of one of the most brittle situations in
Speaker 1: economic history. Our market is held up by whether four
Speaker 1: or five companies will continue to buy chips that start
Speaker 1: losing the money the second they're installed. And I'm disgusted
Speaker 1: by how many people are unwilling or unable to engage
Speaker 1: with the truth, favoring instead a scornful, contemptuous tone toward
Speaker 1: anybody who doesn't believe that generative AI is the future.
Speaker 1: If you're a writer that writes about AI smarmily insulting
Speaker 1: people who don't understand AI, you're a shitty fucking writer
Speaker 1: because ai't is either not that good or you're not
Speaker 1: good at explaining what it's good. Perhaps it's both, dickhead,
Speaker 1: And if you want to know my true agenda, it's
Speaker 1: that I see something in generative AI, and it's boosters
Speaker 1: that I truly dislike. Large language models, authoritativity state things
Speaker 1: that are incorrect because they have no concept of right
Speaker 1: or wrong, well really anything. They don't have concepts of concepts.
Speaker 1: They don't think. I believe that the writers Managers and
Speaker 1: executives that find it exciting do so because it gives
Speaker 1: them the ability to pretend to be intelligent without actually
Speaker 1: learning anything, to do everything they can to avoid actual work, knowledge,
Speaker 1: or responsibility for themselves or others. There is this overwhelming
Speaker 1: condescension that comes from fans of generative AI, the sense
Speaker 1: that they know something, you've done, something they double down on.
Speaker 1: We are being forced to use it by bosses or
Speaker 1: services we like that now insist it's parts of our
Speaker 1: documents or our search engines, not because it does something
Speaker 1: or helps us, but because those pushing it need us
Speaker 1: to use it to prove that they know what's going on.
Speaker 1: To quote my editor Matt Hughes, generative AI is an
Speaker 1: expression of contempt towards people, one that considers them to
Speaker 1: be a commodity at best and a rapidly depreciating asset
Speaker 1: at worst. And Matt would have said that correctly. I
Speaker 1: haven't quite cracked why. But GENERATAI also brings out the
Speaker 1: worst in people. By giving the illusion of labor, it
Speaker 1: excites those who are desperate to replace the commoditize it.
Speaker 1: By giving the illusion of education, it excites those are
Speaker 1: too idle to actually learn things by convincing them, like
Speaker 1: uber CEO Travis Kalenik, then a few minutes that they
Speaker 1: can learn quantum physics. By giving the illusion of activity,
Speaker 1: it allows the gluttony of business idi it's that control
Speaker 1: everything to pretend that they're doing something. By giving the
Speaker 1: illusion of futurity, which is David Carp's excellent term, it
Speaker 1: gives reporters that long since disconnected from actual software and
Speaker 1: hardware the ability to pretend that they know what's happening
Speaker 1: in the tech industry. And fundamentally, it's biggest illusion is
Speaker 1: economic activity, because despite being questionably useful and burning billions
Speaker 1: of dollars, its neat to do so creates justification for
Speaker 1: spending billions of dollars on GPUs and data center sprawl,
Speaker 1: which allows big tech to send money into something and
Speaker 1: give the illusion of growth. I really love doing this show.
Speaker 1: I love it so much, but I don't enjoy it
Speaker 1: this material. I mean, I enjoy performing it, I guess,
Speaker 1: But what I'm talking about is pretty fucking grim. And
Speaker 1: every week I am cataloging how people in power haven't
Speaker 1: noticed something that's inherently a scam that's really based on lies,
Speaker 1: and how the people responsible in the media have just
Speaker 1: kind of turned away from readers in favor of doing
Speaker 1: what they think the market wants or confirming their own
Speaker 1: lazy biases. It's sad, and I think I'm right, and
Speaker 1: I'm not necessarily happy about being right. And if I'm wrong,
Speaker 1: I get asked this a lot. If I'm wrong, I
Speaker 1: will explain why I'm wrong in great detail. I will
Speaker 1: not shy away from taking accountability, because I think that
Speaker 1: that's what you should expect from me. I'm serious. If
Speaker 1: I'm somehow wrong here, you will hear why. I'll do
Speaker 1: entire episodes about it. I'm serious, but I really do
Speaker 1: not think I am, and that's why I sound kind
Speaker 1: of downcast and alarmed what I'm describing as a bubble.
Speaker 1: I'm one with an obvious weakness. One company's ability to
Speaker 1: sell hardware to four or five other companies all to
Speaker 1: run services that lose billions of dollars. At some point,
Speaker 1: the momentum behind the video slows. Maybe it won't even
Speaker 1: be sales slowing. Maybe it would just be the suggestion
Speaker 1: that one of the largest companies won't be buying as
Speaker 1: many GPUs. Perception matters just as much as actual numbers
Speaker 1: and sometimes more, and a shifting sentiment could start a
Speaker 1: chain of events that knocks down the entire house of cards.
Speaker 1: Check may. I don't know when, I don't know how,
Speaker 1: but I really really don't know how I'm wrong. And
Speaker 1: I hate that so many people will see their retirements wrecked,
Speaker 1: and that so many people intentionally or accidentally helped steer
Speaker 1: the economy in this reckless, needless, and wasteful direction, all
Speaker 1: because big tech didn't have a new way to show
Speaker 1: quarterly growth. And that there are so many people out
Speaker 1: there that love the idea of replacing workers and using
Speaker 1: the computer to do work for them. And I hate
Speaker 1: that so many people have lost their jobs because companies
Speaker 1: are spending the equivalent of the entire GDP of some
Speaker 1: European country on data centers and GPUs that won't actually
Speaker 1: deliver any value. Sach and Adella is a fucking monster.
Speaker 1: Fifteen thousand people laid off this year so you can
Speaker 1: do more, fucking clippy, you ass wipe. If sach an
Speaker 1: Adella somehow it hears this up, be so happy. But
Speaker 1: my purpose here is to explain to you, no matter
Speaker 1: your background or interest or creed or whatever way you
Speaker 1: find my work why all of this is happening. As
Speaker 1: you watch this collapse, I want you to tell your
Speaker 1: friends about why, the people responsible and decisions they made,
Speaker 1: and make sure it's clear that there are people responsible.
Speaker 1: Sam Altman, Dario Ama Day, Sachin Adela, Sundar Pieshit, Tim Cook,
Speaker 1: Elon Musk, Mark Zuckerberg, and Andy Jasse have overseen a needless, wasteful,
Speaker 1: and destructive economic force that will harmer economy, our markets,
Speaker 1: and the tech industry writ large. And when this is over,
Speaker 1: they must be held accountable. And remember that you, as
Speaker 1: a regular person, can understand all of this. These people
Speaker 1: want you to believe that this is black magic, that
Speaker 1: you're wrong to worry about the billions wasted or question
Speaker 1: the usefulness of the tools. They want you to sit
Speaker 1: there and say, tech God away from me. I just
Speaker 1: don't understand how the computer works anymore. How about that
Speaker 1: the computer doesn't work anymore, that the computer regularly does
Speaker 1: not do the things you want it to. And Generative
Speaker 1: AI just the most pornographic example of a tech industry
Speaker 1: that gave up on user interfaces, user experience, and users altogether.
Speaker 1: You were smarter than they reckon and stronger than they know.
Speaker 1: In A better future is one where you recognize this
Speaker 1: and realize that power and money doesn't make a man righteous,
Speaker 1: right or smart. These people sicken me, and if I'm
Speaker 1: going to be honest, I think a lot of this
Speaker 1: work comes down to them reminding me of people I
Speaker 1: grew up with, people I've met throughout my life. Speecious
Speaker 1: managers that have got there by glad handling, not through
Speaker 1: real work or producing anything of value, but by stealing
Speaker 1: or tricking, by throwing other people under the bus, and
Speaker 1: in some cases, and I'm thinking of one specific fucking
Speaker 1: person driving it themselves. These people are the ones the
Speaker 1: most excited about AI. They're the ones that believe that
Speaker 1: this technology will finally give them the ability to have
Speaker 1: the abilities of those that work without actually having to
Speaker 1: get off their fucking asses. And they sicken me. They
Speaker 1: disgust me, because there is a different way of looking
Speaker 1: at how generative AI could have been. That it enhances humans,
Speaker 1: that it makes them able to do more things rather
Speaker 1: than replacing them. That likely would have led us in
Speaker 1: a different direction and probably wouldn't have led to the
Speaker 1: billions of dollars of investment in this because when you
Speaker 1: think about helping people. Suddenly the money dries up. I
Speaker 1: sound cynical, but I've said this before. I'm a broken
Speaker 1: hearted romantic. I hate what the tech industry has become.
Speaker 1: But people also said that I can do this. Fucking
Speaker 1: four years ago I had five years ago, had three
Speaker 1: hundred subscribers on my newsletter on about sixty seven thousands
Speaker 1: of people, an indeterminate amount of you. I can't say
Speaker 1: it due to policy. Listen to this show, and that's
Speaker 1: proof enough. I think that one idiot, worked up white
Speaker 1: boy from London that the school teacher once said should
Speaker 1: get used to flipping burgers can do something. I'm nobody.
Speaker 1: I'm just a guy, but I've spent the time to
Speaker 1: read this stuff and to divine meaning from this stuff,
Speaker 1: just like you can. I hope I've helped you. That's
Speaker 1: what I'm here to do. I love doing this, and
Speaker 1: I feel ever grateful that I'm able to every day,
Speaker 1: and I love all of you for listening. It takes
Speaker 1: a lot of ever to put this out, but it
Speaker 1: also is a choice of yours. How much time you
Speaker 1: can you have in a day is not your choice,
Speaker 1: but how you used it is. And I deeply appreciate
Speaker 1: you've forgiving me your time. Thank you so much. This
Speaker 1: has been the hater's guide to the AI bubble. Thank
Speaker 1: you for listening to Better Offline.
Speaker 2: The editor and composer of the Better Offline theme song
Speaker 2: is Matasowski. You can check out more of his music
Speaker 2: and audio projects at Matasowski dot com, M A T
Speaker 2: T O S O W s ki dot com. You
Speaker 2: can email me at easy at Better Offline dot com
Speaker 2: or visit Better Offline dot com to find more podcast
Speaker 2: links and of course, my newsletter. I also really recommend
Speaker 2: you go to chat dot where's youreaed dot at to
Speaker 2: visit the discord, and go to our slash.
Speaker 1: Better Offline to check out our reddit.
Speaker 2: Thank you so much for listening.
Speaker 1: Better Offline is a production of cool Zone Media.
Speaker 2: For more from cool Zone Media, visit our website Coolzonmedia
Speaker 2: dot com, or check us out on the iHeartRadio app,
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